In a recent discussion with the Russian media outlet Izvestia, Rahimi Mohsen, the trade attaché of the Iranian Embassy in Russia, revealed that both nations are keen on exploring digital financial avenues, particularly Central Bank Digital Currencies (CBDCs), to bolster trade amidst the challenging backdrop of international sanctions.

This exploration into digital finance emerges as both Tehran and Moscow seek resilient methods to sustain and enhance their economic cooperation.

Navigating Through Sanctions

Mohsen emphasized that CBDCs, including Russia's digital ruble and Iran's crypto-rial, could play a pivotal role in mitigating the adverse effects of sanctions imposed by the US, the EU, and their allies following the outbreak of the war in Ukraine in 2022.

Despite the potential, Mohsen acknowledged the existing difficulties with CBDC-related payments, citing the necessity for infrastructural and regulatory developments to accommodate this new form of digital finance.

"Iran intends to cooperate with Russia to implement new regulations, as Tehran maintains an effective trade partnership with Moscow," stated Mohsen.

Maxim Chereshnev, the Chairman of Russia's Council for the Development of Foreign Trade and International Economic Relations, echoed this sentiment, emphasizing the strategic importance of a CBDC-powered partnership with Iran.

Chereshnev outlined how this collaboration could fortify Moscow's influence in the Middle East and Central Asia and resolve the pressing issue of making payments in restricted currencies like the dollar and euro.

Overcoming Trade Hurdles

The reliance on their fiat currencies for trade has led to significant losses for Russian businesses, approximately 20-25% in every deal, due to currency conversion challenges and discrepancies between market and state-controlled rates.

Chereshnev believes CBDCs could alleviate these issues, enhancing trade simplicity, transparency, and security between states.

In line with these developments, Russia has made strides in digital finance. President Vladimir Putin signed a law enabling Russian firms to engage in cross-border DFA (Digital Financial Assets) trade using Russian-issued tokens, including the digital ruble.

This move is seen as a step towards increasing domestic investment options and securing cross-border trade efficiencies.

A Global Shift Towards Digitalization

The momentum for digital fiat projects is broader than that of Iran and Russia. Allies such as Belarus are also hastening their digital currency initiatives, with plans to utilize the Hyperledger Fabric blockchain network.

This global shift towards digitalization, spurred by the need to decentralize and secure cross-border payments, underscores the growing importance of CBDCs in the international financial landscape.